The Affordable Care Act: A Pre-2016 Update

Iowa Health Care Symposium

By

Robert E. Moffit

Senior Fellow, The Heritage Foundation

August 13, 2015

Why Change is Coming

• Continuing Litigation. King v. Burwell is not the end, but a milestone in historic litigation.

• Unworkable Provisions. Individual and Employer Mandates.

• Continued Public Anxiety over Health Costs. This includes continued high costs of insurance and future taxpayer obligations.

• Public Dissatisfaction with the Law.

ACA Coverage: First Three Quarters 2014

ACA Premium Costs: 2013-2014

13 States

15 States14 States

6 States

0

2

4

6

8

10

12

14

16

Num

ber o

f Sta

tes

Change in Premiums for 50-year-olds

ACA Premiums in Exchanges: Age 50

Up 50% + Up 26%-50% Up 0%-25% Down 1% -30%

ACA’s 2014 Deductibles

Mid-West Insurer Competition: 2013-2015

Iowa Illinois Kansas Minnesota Missouri Nebraska Ohio0

2

4

6

8

10

12

14

16

2013 Pre-ACA Individual Market Carriers

2015 Exchange Carriers

Source: 2013 data from The Heritage Foundation Backgrounder 2852 , November 7, 2013. 2015 data, Alyene Senger estimates, Center for Health Policy Studies , Issue Brief 4324, December 22, 2014.

Num

ber o

f Ins

urer

s Pe

r St

ate

The ACA Subsidy System

Percent of Income/ premium payment - based on the 2014 Federal Poverty Level (FPL)

Poverty Level100% - 133 % - 2 percent of income133% -150% - 3 to 4 percent of income150% - 200% - 4 to 6.3 percent of income200% - 250% - 6.3 to 8.05 percent of income250% - 300% - 8.05 to 9.5 percent of income300% - 400% - 9.5 percent of income

•Between 100% to 400% of FPL (2014) is $11,490$45,960 for individuals$23,550$94,200 for a family of four

•There are no exchange credits for individuals or families above 400% of the Federal Poverty Level.

•The premium credits are tied to the second-lowest cost silver plan in the exchange.

The ACA Income Distribution

100-150% 151-200% 201-250% 251-300% 301-400% Over 400%0%

10%

20%

30%

40%

50%

60%

70%

80%

Percent Signing up for Exchange Plans

Percent Signing up for Exchange Plans

Inco

me

as %

of F

PL

Source: Avalere, March 25, 2015

76%

41%

30%

20%16%

2%

ONGOING IMPLEMENTATION ISSUES

• Administration of Exchange Subsidies.• The Recovery of State Exchanges Losses.• The Fragility of CO-OP plans. • State Costs for Medicaid Expansion.

Republicans: No Plan?

• The Patient Choice, Affordability , Responsibility and Empowerment (CARE) Act- Sen. Orrin Hatch, Richard Burr, and Rep. Fred Upton.

• Empowering Patients First Act ( H.R. 2300), Rep. Tom Price ( R-GA). • American Health Care Reform Act ( H.R. 3121), Rep. David Roe (R-TN).• If You Like Your Plan, You Can Keep it Act ( S.1617), Sen. Ron Johnson. • Access to Insurance for All Americans Act ( H.R. 138), Rep. Darrell Issa.• Health Care Choice Act (HR 543), Sen.Ted Cruz and Rep. Marsha Blackburn• Manhattan Institute Plan ( Avik Roy). • The Barasso Plan, Sen. Barasso. ( Not presently in legislative language) • The Rubio Plan, Sen. Marco Rubio ( Not presently in legislative language.)

The Issues for 2016

• How to give ordinary Americans direct control over their health plans and benefits.

• How to reform the federal tax treatment of health insurance.

• How to create robust and competitive health insurance markets.

• How to reform the giant entitlements: Medicare and Medicaid.

What Is Not An Issue

• Expanding coverage for millions of Americans.• Protection of individuals from exclusions from

coverage because of pre-existing conditions.• Provision of financial assistance to low-income

persons.• Transparency in plan and provider pricing.• Quality improvements in care delivery in public

and private insurance.

Areas of Conservative Consensus

• Policy Goals: Personal control of affordable and portable health plans; control of health care dollars and decisions.

• Policy Means:

1. Reforming the tax treatment of health

Coverage.

2. Reforming insurance regulation.

3. Reforming Medicare.

4. Reforming Medicaid.

Options for Reforming Tax Policy

• The provision of individual tax relief. The creation of a new system of national health care tax credits or a standard deduction (Roe and Issa).

• The liberalization of tax relief. The scope of credits expanded to include plans in or out of the exchanges.

• The design or structure of the tax credits vary: flat or progressive, limited or universal, refundable or non-refundable.

• The creation of a targeted tax credit: For individuals or employees in small businesses with incomes up to 300 FPL (Hatch-Upton)

Other Tax-Based Options

• Universal Flat Credit. ( McCain Proposal). It would replace the current tax exclusion with a flat refundable tax credit .

• Tax Credit Based on Health and Income ( The original Heritage Proposal).

• Cap the Tax Exclusion. Replace the ACA’s 40 percent Excise Tax with a flat cap, and use revenues to fund health care tax credits; the cap is annually adjusted automatically on the basis of employee choice.

Rewrite Insurance Rules

• Allow persons with pre-existing conditions to change coverage without underwriting or penalties.

• Allow state review and revision of age rating for coverage.

• Allow state review and revision of health benefit mandates.

• Allow state establishment of new pooling arrangements.

Cost Impact of Insurance Rules

Source: Heritage Issue Brief #4400

Reforming Medicaid• Restructure Medicaid. Create a Medicaid Part A and

B, reflecting the division between payment for acute and long-term or custodial care.

• Expand Care Options. Allow Medicaid enrollees to use Medicaid funds for acute care private coverage.

• Streamline Senior Care. Replace Medicaid funding for “Dual Eligibles” with Medicare funding through a Medicare new defined contribution system.

Reforming Medicare

• Raise The Age of Eligibility. Ideally, and gradually, to 68; but at least 67, and track Social Security.

• Reduce taxpayers’ subsidies for wealthy recipients. • Simplify Medicare FFS. Create a single deductible, uniform

co-insurance, and add catastrophic protection.• Allow doctors and patients to contract outside of

Medicare without legal restrictions or penalties.• Expand Defined Contribution to FFS and force traditional

Medicare to compete with other all other options on a level playing field.

New Market Responses:2016 and Beyond

• The Growth of Direct Payment Arrangements.

• The Growth of Private Insurance Exchanges

An Alternative Exchange Option

Resources• Edmund F. Haislmaier, et al., “A Fresh Start for Health Care Reform”, Heritage Foundation

Backgrounder No. 2970 ( October 30, 2014), http://www.heritage.org/research/reports/2014/10/a-fresh-start-for-health-care-reform.

• The Patient Choice, Affordability, Responsibility and Empowerment Act ( Hatch –Upton), http://murphy.house.gov/uploads/FINAL%20Patient%20CARE%20Act%20Plan.pdf .

• James Capretta and Joseph Antos, “ A Senate GOP Health Reform Proposal: The Burr-Coburn- Hatch Plan,” Health Affairs Blog, http://healthaffairs.org/blog/2014/02/12/a-senate-gop-health-reform-proposal-the-burr-coburn-hatch-plan /

• H.R. 2300 Empowering Patients First Act ( 2015), https://www.congress.gov/bill/113th-congress/house-bill/2300.

• The American Health Care Reform Act: A Better Way, ( 2015), http://rsc.flores.house.gov/solutions/rsc-betterway.htm

• The Health Care Choice Act ( Cruz,2015), http://www.cruz.senate.gov/files/documents/Bills/20150302_Healthcare_Choice.pdf

• Avik Roy, “Transcending Obamacare: A Patient Centered Plan for Near Universal Coverage and Permanent Fiscal Solvency,” The Manhattan Institute, 2014, http://www.manhattan-institute.org/html/mpr_17.htm#.VT_zoWzD-70

• Sen. Marco Rubio, “My Three-Part Pan for the Post-Obamacare Era,” Fox News, March 23, 2015, http://www.foxnews.com/opinion/2015/03/23/my-three-part-plan-for-post-obamacare-era /

• James Capretta and Robert Moffit, “How To Replace Obamacare”, National Affairs ( 2012), http://www.nationalaffairs.com/publications/detail/how-to-replace-obamacare